Political Perceptions: The Ryan Medicaid Questions

Rep. Paul Ryan waves to supporters as he enters during a campaign rally in Lakewood, Colo., Tuesday.

The choice of Paul Ryan to be Mitt Romney’s running mate has pushed Medicare onto the front pages. That’s because the Wisconsin congressman wants to make sweeping changes in the program to slow the growth in its costs, essentially giving future elderly a set sum to shop among competing private insurance plans (much as President Barack Obama’s Affordable Care Act would do for some low- and moderate-income families not covered by government insurance).

But, as I note in the Capital column this week, Mr. Ryan’s budget is tougher on Medicaid, the big state-federal insurance program for the poor, which currently picks up the tab for a much of the nursing-home care of the elderly. Under his budget, federal Medicare spending would go from 3.25% of gross domestic product in 2011 to 4.25% in 2030 and 4.75% in 2050, as the ranks of the elderly grow, the Congressional Budget Office estimates. Meanwhile, federal spending on Medicaid and the allied Children’s Health Insurance Program would go from 2% of GDP in 2011 to 1.25% in 2030 and 1% in 2050.

Medicare last year covered 48.9 million people, most of them elderly, many of them middle class. Medicaid enrolled about 56.1 million, most of the poor, or roughly one in every five Americans. Largely because of so many of them are children — and thus relatively cheap to cover – Medicaid costs a lot less. The cost of both programs has been climbing – and will continue to climb without a sharp change in policy – because they’re covering more people and because health costs are rising faster than nearly anything else.

But as Urban Institute economists recently wrote in the New England Journal of Medicine, the per-enrollee cost of both programs has been slowing. “Between 2006 and 2010…in Medicare spending per enrollee slowed to 4.2% annually, as compared with 4.5% among private payers,” they said. “After large increases in enrollment due to two recessions and the increasing numbers of Americans with disabilities are accounted for, growth of Medicaid spending per enrollee was relatively slow (less than 3% per year) throughout the past decade, owing to both enrollment of a less-expensive population [i.e. healthier or younger] because of the recession and, more important, the fact that states with decreasing revenues and competing priorities were aggressively containing costs.”

That last point is the essence of the Ryan argument: Give the states more flexibility and they’ll find good ways to offer health care to the poor more efficiently and more cheaply than the current federally controlled Medicaid program does. “Absent reform,” the House Budget Committee said, “Medicaid will not be able to deliver on its promise to provide a sturdy health-care safety net for society’s most vulnerable.”

Mr. Ryan wants to change Medicaid from a program where the federal government matches every dollar spent by the states, and sometimes spends more, to a block grant from the federal government; Washington would give states a fixed sum that would climb with population and inflation, and states would spend the money as they see fit. As long as Mr. Ryan was the chairman of the House Budget Committee — but blocked by the Senate and the Democratic president from implementing his ideas – his proposals drew criticism mainly from advocacy groups, many of them on the left.

Governors applauded Mr. Ryan’s call for more flexibility – but didn’t have to cope with the details of his spending plan. That may change if Mr. Romney embraces the specifics of the Ryan Medicaid proposal. Asking states to pick up a bigger fraction of the Medicaid tab to help Washington reduce its deficit sounds a lot better at the U.S. Capitol than it does in statehouses around the country. After all, Medicaid accounted for 24% of state spending in fiscal 2011. “Over the past 10 years, the growth in state spending on Medicaid has exceeded the growth in all other categories of spending, and has been twice as much as the growth in education spending,” the National Governors Association has said.

The Republican Governors Association, in a white paper, pleaded for more flexibility but (without any numbers) also said, “Federal and state financial participation in the Medicaid program should be rational, predictable and reasonable.”

What remains to be seen is whether those governors will deem the Ryan approach to be “rational, prediction and reasonable” if it becomes a plank in a Romney budget next year, if the Republicans win the White House in November.

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